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Essay / Research Paper Abstract
A 3 page paper discussing the effect that actions of the Federal Reserve Board has on businesses’ financial performance. The effect is linked to the business cycle and the economy’s current position within it so that businesses can expect more positive results during times that interest rates are rising. Bibliography lists 2 sources.
Page Count:
3 pages (~225 words per page)
File: CC6_KSfinFedActBus.rtf
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Unformatted sample text from the term paper:
actions of the Federal Reserve Board (Fed) are inexorably tied to the current path of the national economy and the point that it occupies in the classic business cycle.
Rather than being at the mercy of the unabated business cycle and their own collective corporate wits, the monetary policies as implemented by the Fed directly affect businesses financial performance.
The Business Cycle The direction and degree to which actions of the Fed affect business results depends first on what phase of the
business cycle currently applies. Recession to Recovery. When the economy is in recession, unemployment is high and consumers have less available discretionary
income to support those businesses operating in non-essential goods and services. Governments role is to ensure that interest rates are low, to encourage businesses and individuals to continue spending
to support the larger economy. Though revenues may decrease, this is a good period for planning, and depending on financial health, it may be a good time to proceed
with expansion plans in that interest rates are low. Recovery to Growth. In this phase, businesses are conservative in their expansion plans
but slowly add facilities and workers. This reduces unemployment rates, creating an environment in which employers need to compete for the best workers available, driving up wages. These
workers then have more discretionary income to use in the local economy, increasing consumer demand for goods and services. Silvia, Bryson and Vitner (2004) believe that the current outlook
is more positive than the prevailing pessimism will allow. They proclaim that, in the US, at least, "Recovery Morphs Into Expansion." This group expects 2004 to end with
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